Business owners with planning skills are cautiously optimistic about their
prospects for the year ahead.

Bemoaning your lack of dedication to abandoned New Year's resolutions? Spare a thought for small-business owners still setting goals they must meet just to make it through to year end. A survey of 1,800 firms by Lloyds TSB found confidence sliding due to fears of falling domestic demand hitting profits in 2011. Companies reported plans to freeze recruitment and investment and raise prices to maintain margins as costs grow.

Yet the prevailing mood in six companies Business Club asked about their plans was of cautious optimism for 2011. None foresaw significant domestic economic growth but all felt the right plan would get them to the year end in better shape than they entered it.

Venture capital investor George Coelho, co-president of global entrepreneurs' organisation TiE UK and a former Intel executive, has been involved in annual planning in businesses of all sizes. The main challenge is distilling plans down to a few easily understood and communicated goals, he says.

"Corporations like Intel [only] have a few main goals [for the year]. Smaller companies should be able to list the top two-to-four things they want to achieve. Putting down the goals simply and clearly can be hard. I do every plan on the back of a fag packet; the lack of space focuses one. Eventually, the main goals should be on one slide, everything else is support."

Robert Allison, managing director of Expense Reduction Analysts (ERA), recommends "challenging costs" across the business during the process. "Based on a typical 8pc profit margin, for £50,000 of savings a company would have to increase sales by £625,000 to have the same positive impact on the bottom line," he says.

However, Coelho believes cost-cutting should have already been achieved in previous years. Now it's time to focus on growing margins: "Look at the products and how their margins evolve. Is there pricing pressure? Will new products command better margins? Can the product be redesigned and cost-reduced? Can it be sold through different channels or direct?"

Alan Thomas, a business insurance expert at Hiscox, says risk management should also be considered. "The risk of losing a large or long-standing client is constant. Businesses need a plan to cope: this could be developing or refining a new business strategy, or safeguarding specific business through loyalty incentives or longer-term agreements geared up for client retention."

To what extent should employees be involved in plans? Martin Leuw, chief executive of Iris Software says: "You need to balance top-down and bottom-up – be inclusive but you need to drive the plan. The best ideas sometimes come from the most surprising places."

• Can I remember what we do? “Does your day-to-day work match up with that dusty old mission statement? If not, it’s time to rethink.

• Where are we trying to get to? “Maybe it’s a new product or bigger clients. Maybe it’s just the chance to sell up in five years. Re-establish some of those key objectives, and the steps by which you plan to get there. These can be benchmarks for any part of the company which you see as important – sales targets, turnover, size of the organisation, diversification or innovation. Make these targets manageable and sustainable- genuinely unattainable goals will simply lead to disillusionment.

• What can I predict? “Some business planners ‘see’ the next ten years ahead – we think that’s cobblers: you’re lucky if you can envision one year ahead. But you can plan for some impending eventualities: the VAT rise, legislative changes, and a generous margin for contingencies, for example.

“After that: expect the worst, hope for the best, share your vision with everyone you work with, and steer a judicious course.”

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